Power clashes cloud solar’s future in Washington

Government cash incentives have helped a fledgling solar-energy industry gain a toehold in Washington. But battles still loom over how to make solar more affordable for homeowners and small businesses.

Jeremy Smithson of Puget Sound Solar at his Phinney Ridge home. “My house produces all of the energy that it consumes,” Smithson told utility officials at a July meeting in Olympia. “I’m your worst nightmare.”

John Lok / The Seattle Times

Puget Sound Solar’s Peter Vretos, bottom, hands a new solar cell to Jake Hanson at the Beaux Arts home of Matt Leber. At left is colleague Josh Cubbin.Homeowner Leber said, “If I knew that my power was 100 percent hydro, wind, geothermal and possibly even nuclear, I might not be doing this.”

John Lok / The Seattle Times

A detail of a brand-new photovoltaic solar panel installed by Puget Sound Solar. Washington at the end of 2013 had less than 5,700 solar installations.

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Washington solar power

Buoyed by state incentives, solar installations in Washington have been climbing. Click the graphic to enlarge it.

MARK NOWLIN / THE SEATTLE TIMES

Source: Washington State University

A Solar Tale of Three Cities

Seattle’s sunlight resource compared to San Francisco and Los Angeles:

GARLAND POTTS / THE SEATTLE TIMES

Source: National Renewable Energy Laboratory

LOSING GROUND

The struggle to reduce CO2

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This series was supported by a Perry and Alicia O’Brien Fellowship at Marquette University in Milwaukee, Wis. The fellowship enabled Seattle Times reporter Hal Bernton to spend the academic year at Marquette reporting on this project and working with students from the Diederich College of Communications.

In his obsession with all things solar, Jeremy Smithson has put photovoltaic panels on top of his house, garage, and even crafted them into a patio awning.

Smithson views his home as a kind of test kitchen for Puget Sound Solar, a business that he co-founded in 2001 that installs solar systems in Western Washington. With the addition of energy-conservation investments such as power-miserly appliances and extra insulation, he has turned his century-old wood frame home into a showcase for solar’s potential.

“My house produces all of the energy that it consumes,” Smithson declared during a July meeting in Olympia with utility officials to discuss the future of the state’s solar industry. “I’m your worst nightmare.”

In the spring, Gov. Jay Inslee issued an executive order to cut state carbon emissions that called for expanding solar energy in Washington, That is helping spur an intense debate in Olympia among utility companies, solar leasing companies and smaller installers like Smithson about how to overhaul the state’s solar industry.

Solar power represents less than a quarter of 1 percent of the nation’s electrical supply, and remains substantially more expensive to generate than power from conventional coal or natural gas plants.

But solar is undergoing a growth spurt here in Washington, as well as in the U.S., China and elsewhere.

Solar energy’s global capacity increased by 35 percent in 2013 and will continue to expand in the decades ahead — the only question is how fast. Bloomberg New Energy Finance forecast earlier this year that rooftop solar will claim a fifth of the world’s investment in new energy resources through 2020, and that could trigger major changes for once staid utilities as more customers produce their own power.

Solar’s big allure is the ability to generate power for both buildings and a new generation of electric cars without the carbon emissions that are driving global temperatures higher. Its drawbacks have been the high cost of installing solar and the cyclical nature of the power that is produced only during daylight.

In recent years, the industry has benefited from big declines in the price of solar panels as China launched into photovoltaic manufacturing on a massive scale as well as more modest improvements in the efficiency of the solar cells. There also have been advances in battery systems that can store solar power produced during the peak midday periods for solar generation for later use.

But the biggest driver behind the industry’s ascent has been government policies intended to encourage growth of carbon-free power. And some of the biggest battles are over who gets to benefit from these incentives.

These measures include federal tax credits, as well as a complex mix of state supports.

In Washington, utilities must buy back the power from the first wave of solar producers at retail prices rather than the wholesale prices they pay other producers. On top of that, homeowners who install solar also are eligible for cash rebates from state taxpayers that typically top $1,000 a year and can rise as high as $5,000.

Those incentives have helped solar gain a toehold in a state that boasts some of the lowest power rates in the nation due to abundance of zero-carbon hydropower, and thus is one of the toughest places in America to make a compelling case for harnessing the sun’s energy.

Steep growth curve

Washington at the end of 2013 had less than 5,700 solar installations. That tally is dwarfed by California, where there are more than 271,000 installations.

Yet Washington shares in the industry’s steep growth curve, with the number of installations in 2013 jumping by more than half compared to 2012.

There are also a number of new community solar installations — such as the Seattle City Light’s photovoltaic cells installed on top of the Seattle Aquarium. To make that happen, 187 ratepayers invested anywhere from $150 to more than $18,000 to own shares of a project that enables them to claim solar’s financial incentives and credits for power sales.

There is plenty of potential for more solar. The total amount of sunlight in Washington is roughly on a par with Germany, the world’s leading solar nation.

One study released last year by Environment Washington projected that the state could get 5.5 percent of its energy from solar by 2025.

But Washington’s solar resource is distributed through the year in a very lopsided fashion. Photovoltaic systems on homes typically generate surplus power during the long summer days, and then their production plummets during the Pacific Northwest winter.

These seasonal swings make Washington solar producers dependent on the grid to take surplus summer power, racking up utility credits that they can draw upon as the seasons shift and daylight wanes.

In Western Washington, solar potential also is often reduced by trees or hills.

Matt Leber, a retired Microsoft employee, invested $17,000 this summer to install a solar system at his home in the Beaux Arts neighborhood nestled within softwood groves east of Seattle.

Near his site, a shaggy tree will reduce the summer solar potential of his 11 garage-top panels by about 25 percent.

Despite the shading, the system still should be able to offset about a third of the power he buys from Puget Sound Energy, and Leber should be able to recoup 70 percent of his investment by 2020, according to calculations by Puget Sound Solar.

“I ran the numbers, and with the incentives, this is pretty much close to a no-brainer,” Leber said.

Role of leasing

Most of the solar rooftop systems installed in recent years in California are leased, a financing tactic that lets homeowner install panels with little or no money down. The leases are championed by SolarCity, an industry powerhouse chaired by Elon Musk, a billionaire investor who founded Tesla Motors, the electric carmaker.

“Few people have enough money to purchase a solar system up front. (Before leasing) it was more or less a boutique item,” said Andy Schwartz, a director of policy and markets at SolarCity.

But SolarCity has been largely shut out of Washington.

Only utility customers who purchase their power system can claim the state incentive payments, which are greatest if they use equipment manufactured in Washington. And these payments are limited to the first wave of installations within each utility’s customer-service area, so the money would run out if there was a huge surge in the state’s solar industry.

Schwartz and other leasing advocates have been lobbying Olympiato make leasing a ready option in the state.

“I don’t think there can be any serious discussion of solar (in Washington) without leasing, and currently leasing is not viable in Washington” Schwartz said.

Washington’s solar installers largely have opposed efforts to open the state to leasing companies, saying homeowners who are short on cash do better if they get a loan and purchase their own system.

Leasing advocates accuse the Washington companies of protectionism, which they say stifles competition and results in higher prices.

“It’s an uncomfortable thing to talk about. It is a disagreement among friends. But we also have to be real,” said Bryan Miller, of the Alliance for Solar Choice, which advocates for leasing companies.

Puget Sound Solar’s Smithson bristles at the criticism.

“To say that we’re holding back solar is a bunch of hooey,” he said. “I have plenty of middle-class clients.”

The utilities

Washington utilities have been key players in Olympia’s negotiations about the future of solar in the state.

Many utilities want to levy their own fees on solar producers and leasing companies that sell into their power grids.

Otherwise, the utilities say they are forced to shift more of the costs of maintaining the grid to other ratepayers.

Some utilities also are interested in getting into the solar business.

To help make that happen, Rep. Jeff Morris, D-Anacortes, last year submitted controversial legislation that would have given utilities an option to claim exclusive rights to offer solar leasing to their customers.

Morris is now trying to forge new compromise legislation.

Later this year, Inslee, a longtime advocate for solar power, also will release a plan for overhauling state incentives. It is likely to include a blueprint for how leasing could proceed in Washington as well as proposing other reforms that the governor hopes can gain legislative approval and end the fierce infighting over the industry’s future.

“He wants to get this solved,” said Keith Phillips, Inslee’s special assistant for climate and energy.

Plenty of state utility officials question how far the state should go to promote higher-cost solar energy, given the very successful conservation efforts of recent years that has weakened demand for their power.

Many utilities have an abundance of low-cost hydro that produces no carbon emissions. They often have to dump that hydropower on Western power markets at discounted prices.

“What are the problems we’re trying to solve (with more solar)? That’s the question we’re trying to pose to you,” said Dave Warren, of the Washington Public Utility District Association, at a July meeting in Olympia to discuss future solar legislation.

Currently, a state utility can stop taking the rooftop photovoltaic power at retail prices once the total solar power generated within their area reaches one-half percent of their total load.

That cap is much lower than in California. Some proposals would raise it much higher so solar would have a higher growth potential.

Solar-power advocates argue that even in hydropower-rich Washington, solar can help reduce the use of fossil fuels.

Puget Sound Energy, the state’s largest power utility, continues to generate 48 percent of its electricity from coal and gas.

“The main thing I’m absolutely, 100-percent targeted on is coal because of climate change,” said Leber, the Bellevue homeowner. “If I knew that my power was 100 percent hydro, wind, geothermal and possibly even nuclear, I might not be doing this.”

The solar industry also could help power Washington’s transportation fleet, which emits more than 40 percent of the state carbon’s emissions. Seattle is now one of the hottest markets in the country for electric vehicles, and many homeowners investing in solar energy also are investing in these cars.

“We’ve had a lot of customers who have gone out and gotten EVs (electric vehicles) after they got their solar. The potential is huge,” Smithson said.

Hal Bernton: 206-464-2581 or hbernton@seattletimes.com. Marquette University student Alex Krouse assisted with research for this story.

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